What the credit applies to (qualifying R&D expenditure)
The credit is computed by reference to qualifying R&D expenditure on qualifying R&D activities under Cabinet Decision No. 215 of 2025, with computational detail in Ministerial Decision No. 24 of 2026. Expenditure categories commonly discussed in professional analysis include staff costs for personnel directly engaged on qualifying work, and other cost heads specified in the decisions (for example contractors, materials, and depreciable assets—always confirm eligible categories in the official text).
Ministerial Decision No. 24 of 2026 uplifts Staff Costs by 30% (thirty percent) to account for overheads reasonably attributable to undertaking Qualifying R&D Activities (Article (8)(3)).
Cabinet Decision No. 215 of 2025 requires that Qualifying R&D Expenditure amounts to at least AED 500,000 for each R&D Project in the relevant Tax Period or Fiscal Year, excluding any uplift to Staff Costs determined under Ministerial Decisions (Article (5)(3)(b)).
Annual cap on qualifying expenditure (AED)
Ministerial Decision No. 24 of 2026 sets a maximum Qualifying R&D Expenditure threshold of AED 5 (five) million per Qualifying Entity or Tax Group in each Tax Period or Fiscal Year for the tiered rate table (Article (2)(1)).
Tiered rates and minimum average R&D staff
The tiered design applies different credit rates to successive bands of Qualifying R&D Expenditure. Ministerial Decision No. 24 of 2026 sets the following rates and conditions (Article (2)(1)) (see Ministerial Decision No. 24 of 2026):
| Band of qualifying R&D expenditure (per tax period) | Minimum average R&D staff | Credit rate on expenditure in the band |
|---|---|---|
| First AED 1,000,000 | At least 2 | 15% |
| Portion above AED 1,000,000 up to AED 2,000,000 | At least 6 | 35% |
| Portion exceeding AED 2,000,000 up to AED 5,000,000 | At least 14 | 50% |
How to read the staffing condition
To qualify for a specific R&D Tax Credit rate, the Qualifying Entity or Tax Group must meet both the Qualifying R&D Expenditure threshold and the minimum average number of R&D Staff threshold. If either threshold is not met, the rate is adjusted downward to the highest rate for which both thresholds are satisfied (MD 24/2026, Article (2)(7)).
The average number of R&D Staff per Qualifying Entity is calculated by adding the total number of R&D Staff for each month during the Tax Period or Fiscal Year (regardless of whether they worked the full month or part of it) and dividing by the number of months in which the Qualifying R&D Activities were undertaken during the Tax Period or Fiscal Year (MD 24/2026, Article (2)(4)).
Modelling staff headcount early is a core output of R&D readiness assessment and strategic planning.
Worked examples (illustrative only)
Assume figures match the MoF-published tables and all activities/expenditure qualify.
Example A — spend below AED 1m, staffing satisfied
Qualifying R&D expenditure in the tax period = AED 800,000. Minimum average R&D staff = 3 (meets the “at least 2” requirement for the first band).
Indicative credit ≈ 15% × 800,000 = AED 120,000 (before considering tax utilisation rules).
Example B — spend across first and second bands
Qualifying R&D expenditure = AED 1,400,000. Minimum average R&D staff = 8 (meets thresholds for first and second bands).
Indicative credit ≈ (15% × 1,000,000) + (35% × 400,000) = 150,000 + 140,000 = AED 290,000.
Example C — high spend, third band, staffing satisfied
Qualifying R&D expenditure = AED 4,200,000 (under the AED 5,000,000 table maximum). Minimum average R&D staff = 16 (meets the “at least 14” requirement for the third band).
Indicative credit ≈ (15% × 1,000,000) + (35% × 1,000,000) + (50% × 2,200,000) = 150,000 + 350,000 + 1,100,000 = AED 1,600,000.
These examples show the tier table calculation only. You must also apply: (i) the AED 500,000 per-project minimum (CD 215/2025, Article (5)(3)(b)), (ii) the 30% uplift to Staff Costs (MD 24/2026, Article (8)(3)), and (iii) utilisation rules (including non-refundability) in MD 24/2026 and CD 215/2025.
Staff uplift, project minimums, and modelling discipline
Two “moving parts” in the published rules are easy to mis-model: the 30% uplift to Staff Costs (MD 24/2026, Article (8)(3)) and the AED 500,000 per project minimum Qualifying R&D Expenditure requirement excluding any uplift (CD 215/2025, Article (5)(3)(b)). In a robust model, treat these as gating rules and document your methodology.
Similarly, the minimum average R&D staff thresholds should be modelled using the same time basis as your expenditure bands (for example, tax period averages vs project life averages) exactly as defined in the decision. A spreadsheet that uses end-of-year headcount instead of the statutory average can materially misstate tier eligibility—even if total spend is unchanged.
Finally, keep a clear separation between management accounting categories and statutory qualifying categories. A cost that is “R&D” in a business plan is not necessarily qualifying R&D expenditure under Cabinet Decision No. 215 of 2025 until mapped to the decision’s eligible headings and exclusions.
Non-refundability and corporate tax utilisation
Ministerial Decision No. 24 of 2026 states that the R&D Tax Credit shall be non-refundable and shall be utilised against the Corporate Tax and/or Top-up Tax liability of the Qualifying Entity, Tax Group, Domestic Group or any other Person pursuant to Article (6) of that Decision (Article (2)(2)).
Prepare filings with claim readiness preparation and maintain evidence through documentation systems.
Official sources
- Ministerial Decision No. 24 of 2026 (MoF PDF) — rates, caps, staffing, expenditure mechanics
- Cabinet Decision No. 215 of 2025 (MoF PDF) — framework definitions and policy anchors
Contextual reading: how the credit works in practice; eligibility: who qualifies. Ongoing support: ongoing advisory.